NCLAT stays bank guarantee invocation in JAL case, admits contractor’s plea
NEW DELHI: The National Company Law Appellate Tribunal (NCLAT) on Friday issued notice to the monitoring committee of bankrupt Jaiprakash Associates Ltd (JAL) on a plea filed by Velocity Enterprises, a Bhopal-based contractor, challenging the dismissal of its claim under the insolvency proceedings.
The appeals court said the matter should be considered and directed that the bank guarantee provided by Velocity should not be used until the next hearing. He also requested that the contractor extend the validity period of the warranty.
The next hearing date is May 4.
Under the Insolvency and Bankruptcy Code, this notice was sent to the monitoring committee as the resolution professional (RP) was managing the company during the corporate insolvency resolution process (CIRP). Once a resolution plan is approved, the RP’s role largely ends and a monitoring committee consisting of the lenders, the successful resolution applicant and, in some cases, the RP, oversees implementation.
The development follows the Allahabad bench of the National Company Law Tribunal (NCLT) approving the company of Adani Enterprises Ltd. ₹While a 14,543-crore resolution plan was prepared for debt-laden JAL on March 17, Velocity’s claim regarding termination of employment contract and related demands was rejected.
Velocity has been awarded a 2022 work order for the design, engineering, supply and commissioning of electrical and substation works for an irrigation project, with approx. ₹1.48 crore.
Disputes arose during the execution, after which the contractor resorted to arbitration and filed a claim for compensation of approx. ₹2.55 crore before RP. However, RP terminated the contract and denied the allegations, citing violations including failure to provide required transformers and work stoppage.
Opposing the move, Velocity argued that the termination of the bank guarantee and proposed cancellation was in bad faith and that its claims were denied without adequate opportunity for a hearing.
The NCLT refused to intervene, arguing that the dispute was contractual in nature and fell outside the limited jurisdiction of the insolvency framework.
Aggrieved, Velocity moved the NCLAT by filing its first objection against the rejection of an operational creditor’s claim in the Adani-approved resolution plan.
NCLT, National Asset Reconstruction Co., which has over 85% voting share. Ltd (NARCL)-led Adani Enterprises’ plan with nearly 93% creditor approval. The plan roughly presents ₹6,000 crore as upfront, balance to be paid in two years and was preferred over that of Vedanta Ltd ₹12,505 crore proposal proposing a payment over five years.
